After 60 days of pain, JINGdong’s shock continues. Behind the intensive personnel adjustment, what kind of signal is delivered? What’s going on inside JD.com? Adjustment can jingdong usher in a rebirth?
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“If you ask which company has the lowest happiness index among its executives in China, I think it must be JINGdong.” “In my 20-year career, I have never experienced such a big adjustment or change, and I have been losing sleep these days,” a JD.com executive wailed at a recent internal meeting.
Within days of his speech, the executive was removed from his post, becoming yet another cannon fodder in the company’s current personnel shake-up.
Back two months ago, at the group’s annual general meeting in mid-February, JD announced frankly that “10% of the top executives above vice president level will be eliminated in 2019”, causing a public outcry. As a company with 180,000 employees, JD may have dozens or even hundreds of executives in this round of adjustment.
Jd.com has been at the center of a series of recent personnel changes at Internet companies. At the same time, as this top-down personnel “surgery” operator, Liu Qiangdong’s iron fist is unparalleled.
“The head of every first-level department has been talked to by Liu recently, and some departments have disappeared after talking to him,” said a JD employee.
Over the past 60 days, JD layoffs continue to ferment. On social networking platforms in the workplace, negative news about JD’s “abolishing the basic salary of deliverymen” and “implementing 995 or 996” emerged in an endless stream. Inside JD.com, a sense of nervousness continues to spread. One employee described it this way: “Almost everyone is just entering the workplace, scrambling for work every day in fear of being fired.”
Over the past year or so, JD.com has fallen rapidly from its peak to its all-time high at the beginning of last year, its stock price has been sliding, and then to The Minnesota incident involving Liu Qiangdong. Now, the e-commerce giant has reached its most critical moment.
‘We have reached the point where we have to change,’ a JD.com executive said at an internal meeting. And a few investors think, adjust, change just have hope.
From the top
Zhang Chen, THE CTO of JD.com, became the first person to eat crab.
On March 15, JD.com surprised the world with an announcement of Zhang Chen’s departure. As CTO, Zhang is seen as a key figure in JD.com’s announced “technology transformation” in 2017.
Zhang Chen has been working at JD for more than three years, but his presence is not high. “CTO has long been an empty position in JD,” a jd insider close to Zhang Chen told 24/7.
In 2015, JINGdong made drastic reforms to its technical structure: for the first time, the technology department was separated from the business department and became an independent technology system, which was mainly divided into two parts: first, the core technology RESEARCH and development team, including cloud, big data, AI and other technical teams; The other is the application technology R&D team, which mainly serves the business of JINGdong Mall. The two teams are directly subordinate to the CTO system.
In the beginning, Zhang Chen was in charge of AI, big data, cloud computing and other departments, but these businesses were gradually split up and given specific heads.
“In the end, Zhang basically had no actual business in his hands, and was responsible for Intranet infrastructure, even OA systems,” the source told 24/7. This directly led to Zhang Chen from the business line, jingdong’s position was once very awkward.
At last year’s 618 event, Zhang appeared as the finale guest, but his powerpoint presentation at the event was all made up by the staff and he “couldn’t say anything”.
In response, JD.com said that “Zhang Chen was mainly responsible for the construction of the group’s technology RESEARCH and development system, especially IoT, information security, international talent introduction, major technical problems, cutting-edge technology research and external technical cooperation, and other fields, most of which are specific businesses.”
Ma di, a former JD.com employee, was not surprised by Zhang’s departure. “People and companies have problems. Jd has been unclear about its technical direction, making it difficult for ctos; Zhang Chen himself is too academic and has been unable to promote the implementation of business.”
CTO Zhang Chen’s resignation, jingdong opened this round of “executive optimization” prelude. As a result, liu’s two longest-serving professional managers — CLO (chief legal officer) Long Yu and CPO (chief public affairs officer) LAN Ye have left the company. To some extent, this marks the end of the era of parachuting executives at JD.com’s foreign companies.
According to people close to jd.com, Mr Zhang and Long Yu are often “inseparable” inside the company. “They belong to one faction, and the ‘local veterans’ represented by Xu Lei, CEO of Jingdong Mall, are out of their element.”
In jingdong insiders, as “edge” executives, Long Yu and LAN Ye “optimization” belongs to the common sense. Before this round of adjustment, two people in jingdong’s status has fallen again. In early March, Long Yu resigned as CHO (chief talent officer), no longer in charge of personnel, and was replaced by Yu Rui, the second term of jd management trainee. Since LAN Ye was transferred from the powerful CMO (chief marketing officer) to the CPO in the second half of 2015, he has lost his voice.
On April 9, two senior vice presidents of JD.com, Wang Xiaosong, president of 7FRESH, and Hu Shengli, president of 3C, were also removed from their posts, citing a “core executive rotation plan.”
Jd.com insiders told 24X.com that Wang’s departure may have something to do with the ongoing difficulties at 7FRESH. “We’ve been talking about 1,000 stores in three to five years, but now we can’t do that, 30 stores at most this year.” So far, 7FRESH has opened just 12 stores, well below expectations.
In a restructuring in December, the FMCG business group was split and Mr Wang’s role as president was moved back to 7FRESH and fresh, which was interpreted as a “demotion”. Previously, it was widely rumored that Wang xiaosong would take a post in the United States, but Wang himself denied it.
Jingdong this round of personnel adjustment revealed two big signs: one is directly from the top “cut”; At the top, the relatively marginal professional managers were chosen first.
“Why start at the top? Because senior management is the most difficult to face and push, this shows the determination of JD, “said a senior jd official. “Compared with xu Lei and other ‘old ministers’, professional managers are generally not strong in fighting ability and do not have enough recognition of JINGdong culture.”
From the middle of March till now, jd’s round of intensive personnel adjustment has lasted about a month, but it is still not finished. In an internal recording obtained by 24/7 technology, a SENIOR vice-president of JD.com said: “After the optimization of the president, then the director, then the general staff, will continue until the end of April.”
In the list of “optimization”, ma Song, senior vice president and head of technology research and development system of JD, Yu Yongli, former head of JD Y Business Division, Du Shuang, former general manager of New Channel Business Division, Yang Ping, vice president of JD supply chain, etc.
However in the outside world, jingdong’s adjustment released a certain positive signal. One jd.com investor said the company’s changes had given them hope, “rather than being as insensitive and indifferent as before”. Another investor joked, “If any Internet company is going to lay off employees, I think the company has a hope.”
So is the feedback from capital markets. Over the past month, JD.com’s stock price has risen 11% instead of plummeting in response to the personnel shock.
A mounting
“The company has to change. It’s time to change. Every department is under great pressure,” said a SENIOR jd.com official.
Now, almost every department is emphasizing “fighting spirit”. “Some excellent deeds of old employees are repeatedly mentioned, and the department Leader even calls directly, ‘If there is no fighting spirit, just leave’.”
In line with the personnel changes, JD.com recently restarted the “996 work schedule,” which is not mandatory, but has been implemented in many departments, according to jd.com employees.
“I have to check in and out more strictly, and even my KPI is much heavier than before.” An employee of JD Finance told 24X.com, “Although there were KPIs in the past, they performed very well in the actual business, but now they are assessed every month according to the volume of business and new functions launched.”
This is the fighting state That Liu qiangdong wants. Jd.com was known for its “Wolf culture” before the ipo, but it had all but disappeared inside the company before the overhaul.
In this regard, a SENIOR executive of JD.com sympathized: “Many departments are overstaffed, the department walls are standing, a large number of people are dawdling, more and more bureaucratic. As an Internet company, it becomes less and less efficient, just like a traditional company.”
Such a situation, JINGdong has experienced around 2016. As a result, a large number of professional managers, including Shen Haoyu and Xiong Qingyun, left one after another, and Liu qiangdong returned to management.
After Mr. Liu returned, JD.com quickly recovered. In 2016, JD.com posted its first full-year profit after 12 years of losses. But that momentum failed to last, and with Mr. Liu once again stepping back, JD.com’s problems were exposed again.
Lazy working conditions have seriously affected jingdong’s operational efficiency. “There are 15 people on my project, but only eight of them are actually working,” complained one jd management trainee. Leaders often form factions and criticize other business teams.
Last year, he recalled, JD.com encouraged employees to report various exploratory projects, with the policy that eight employees could start their own business, and the position of project leader could be transferred from T (technology) to M (management).
For this reason, many project teams exaggerate their own value. “This later led to people at every level wanting more projects in their department, ‘creating’ a batch of garbage leaders, and the entire department almost doubled in size.”
It is understood that this batch of hard “build” out of the exploratory project many in charge, in the adjustment from director to department manager, or directly fired.
At a recent internal meeting, Mr Liu described the chaos in JD.com’s management as “overstaffed and cliques”. It is reported that the meeting was not a small meeting, including CXO, BUSINESS group SVP and VP, there were more than 100 people, several executives were called.
In an open letter dated April 12, Liu qiangdong stressed again that “the person who dawdle around is not my brother. The real brother must be the one who struggles together, takes responsibility and pressure together, and enjoys the fruits of success together.” In the letter, Liu qiangdong also said that JD.com has not implemented the elimination system for the last four to five years, which has resulted in a rapid expansion of staff and an increasing number of people fooling around. This must be changed.
As a giant company, JD.com’s internal cost control has become increasingly inefficient in the past few years. Jingdong executives disclosed that last year, The purchase of servers in Beijing Dongguang costs up to 8 billion yuan.
“Now jingdong Mall is profitable in only four categories, the rest are losses, the 8 billion almost eat up the profits of the four categories. That’s why JINGdong is not profitable, because people spend so much, and it hurts the organization.” The above high-level said.
The chaos of management and cost control directly led to the decline of JINGdong’s performance.
In 2018, JD’s net loss from continuing operations attributable to common shareholders was rmb2.5bn; In 2017, JD posted a net profit of 116.8 million yuan. On a non-GAAP basis, JD’s net profit from continuing operations attributable to common shareholders was RMB3.5bn in 2018, compared with Rmb5bn in 2017. Both data showed varying degrees of decline.
Weak growth of active users has become more jingdong worries. As of December 31, 2018, the number of active users on JD’s platform was 305.3 million, up 20% year on year and basically flat month-on-month. In contrast, Alibaba and Pinduoduo both saw their active users grow by more than 30% over the same period.
Jd.com’s GMV growth dropped to 20% year-on-year in the past few months, according to 24/7 Tech. In Q4 2018, JD.com’s GMV was 514.4 billion yuan, up 27.5 percent year on year, and now the figure has dropped further.
Cash flow is a lifeline for retailers. If GMV growth continues to decline, it will mean jd.com will have less bargaining power with suppliers and its efforts to generate cash flow by extending the payment cycle will also be affected.
The decline has been matched by JD.com’s continued investment in technology. At the opening meeting in 2017, Liu shouted, “Jd will only have three things in the next 12 years: technology! Technology! Technology!” According to the company’s financial report, JD invested 12.1 billion yuan in technology in 2018, up 82.6 percent year on year.
Who started it?
What causes jingdong’s frequent management problems? There has been much debate about this, but one point of view remains: Mr. Liu’s personal impact on JD.com.
At the beginning of its establishment, JINGdong did not have the “partnership mechanism” and was a typical enterprise with the “arbitrary” founder. This gene almost determined the fate of jingdong from the very beginning.
“In the retail industry, which seeks efficiency and execution, it needs a combative and forward-looking boss to guide it,” said Xu Xin, founder of Today Capital. Such a model helped JD rise rapidly in its early days. But as the company matures, decentralization becomes an inevitable choice. At this point, jingdong’s management problems began to be exposed.
Liu stepped down as CEO of JD.com in May 2014 after the company went public on Nasdaq, and began to step up efforts to delegate power to the company. In 2013, Mr Liu made his first attempt to leave the company to study in the US, with less direct involvement on the front line of the business.
For a business, Mr Liu envisions, “a republic is better than its own dictatorship and peace is better than war”. However, this was not the case. After the delegation of power to professional managers, the “culture of fighting power and execution power” that JINGdong once emphasized was rapidly diluted, and problems such as bureaucracy, sluggishness and corruption were gradually exposed.
In 2016, Liu returned to the front line, reporting directly to 10 key executives at 360buy and 18 at JD.com. On the board, Mr. Liu controls 80.2 percent of the voting rights.
As Previously reported by Caijing, Liu never really relinquished power. During his study tour in the United States, he sat in on every morning meeting of JD.com, though he did not talk most of the time.
Since 2016, JD Finance and JD Logistics have been separated from jd’s main business and become sub-groups. According to jd.com employees, these sub-groups are not very independent, and Liu makes all the decisions on important issues.
In the eyes of the outside world, this is a company with too obvious “founder label”. Even now, the success or failure of JD is still highly dependent on liu Qiangdong, the founder with supreme authority.
This is a paradoxical phenomenon. On the one hand, there is the view that Liu’s “autocratic dictatorship” has affected JD.com’s corporate operations. According to a former yihaodian executive, a big reason for jd.com’s success was Mr. Liu’s highly controlled and high-profile approach, which put the company at risk if things went wrong. Therefore, JD is in urgent need of a “number two” who can assume an important role.
On the other hand, once Liu qiangdong begins to delegate power, jingdong’s “values” and Wolf culture in the early stage of entrepreneurship will quickly go out of shape, and the company’s combat effectiveness will be seriously weakened.
Another problem is the failure of the innovation business. As a retail-rooted company, JD.com has a long history of making lackluster progress in business innovation. Once detached from the main business, such innovations are often dabbled in.
Take smart speakers as an example. Jingdong started to lay out its business in 2014, and it is almost the earliest company to make smart speakers in China. “We worked hard for three years, and the supply chain has been completed, but now no one remembers jingdong speakers,” says a former employee.
Compared to the “IOT story” created by Xiaomi, Baidu and Alibaba, “JD.com just sells this thing as a product, without building a fan base or a story,” the employee said. By the time JD began to realize the problem, the initiative of the whole market had been taken by other giants.
“Internally, we actually have a lot of creative ideas. We don’t want to innovate, we don’t want to make mistakes.” A former JINGdong executive said. In 2017, when this senior executive left, he found that JINGdong had become more and more errless. Many businesses had been drilling Wells before, “we were about to see ‘oil’, but we didn’t stick to it and withdrew.”
Jd.com had previously dabbled in smart refrigerators and toiled for three years, but the products were never released or advertised.
After seeing smart refrigerators at AWE (China Home Appliances and Consumer Electronics Exhibition) in 2017, Liu was so worried that he told THE PUBLIC relations department of JD.com to make it a big deal.
Later, JINGdong began to promote smart refrigerators at press conferences, but people in the purchasing and Marketing Department felt that the products could not sell. “Many departments could not connect with each other, and the resources failed to keep up. Later, the person in charge of the smart refrigerator business left, and the project did not continue,” said a JINGdong employee who had been involved in the smart refrigerator business.
Brokeback survival
In response to the spreading crisis and personnel changes, JD is also constantly looking for opportunities in emerging businesses. But so far, the effect is not ideal.
At the 2018 annual report meeting, Liu Qiangdong emphasized that JD will focus on three directions in 2019: expanding the third and fourth tier market, enterprise digital upgrade and offline development, which respectively correspond to the three businesses of JD: shopping, retail solution service and offline retail business represented by “jingdong 7FRESH”.
In a restructuring last December, JD.com separated its shopping division from its three business groups and appointed Hou Yan, general manager of JD wechat’s Q business unit, as its head, reporting directly to JD CEO Xu Lei.
According to jingdong Buy internal personnel revealed that before buy does not report to the Marketing Department, just cooperate to do the launch, “their own small”. This year, the group established the strategic business Integrated Marketing Department, which directly connects with 7Fresh, Shopping, Toplife and other new businesses, and will give priority to the resources and budget to the businesses with fast growth and great potential.
In February, JINGdong Pinggou launched a new round of full-category investment promotion in an attempt to reduce its reliance on the original platform. In this regard, Xu Lei also mentioned in jingdong’s 2018 annual report analyst meeting, “In addition to continuing to maintain attention and investment in the shopping and wechat market, the future jingdong will focus on building more suitable for shopping and wechat market supply chain capabilities.”
However, from the feedback of businesses, jingdong buy the current competitiveness is still not strong. “Pinduoduo can sell more than 300 pieces of a woman’s dress for around 40 yuan in a week, while jingdong can sell less than 20 pieces in the same period,” said a clothing seller.
In order to support the shopping business, JD.com has previously increased the search weight of “shopping”, but the ranking of shopping products is still lower than its own products. “After more than a dozen pages, you can’t search without brushing,” a daily chemical product seller told 24/7 Technology.
Now in all kinds of JINGdong shopping groups, there are many active brush groups, the quotation is usually, “the unit price of less than 100 commission 10, 100-200 commission 13”. This is a huge cost pressure for businesses.
The most elusive is the attitude of jingdong’s senior management.
At present, jingdong pinggou is still hidden, except for the entry of mini program and wechat Jiugong, in the JINGdong App, users need to click “JINGdong APP-Quality fashion column – Jingdong Pinggou” to enter. “Since last year, we said we would make great efforts to promote it, but we have not seen actual actions, and the senior management has always hesitated,” said jingdong Pinggou insider.
In addition to shopping, Liu sees offline channels as another source of future growth for JD.com. But in just six months, 7FRESH, the leader of offline channels, has been hit by a shock.
Wang Xiaosong, president of 7FRESH and fresh products, was transferred to a new post on April 9, just over four months after he took over 7FRESH.
“None of the stores make any money. The best store is Ethnic Square, which is supported by JD employees and has an average daily turnover of 500,000 years,” said Wang Feng, an employee at 7FRESH.
“Operations are also a big issue,” he said. “Now 7FRESH has senior executives from different retailers who have copied their successful model into different stores. The whole idea is not uniform and the understanding of retail is not deep.” According to Wang feng, 7FRESH’s leadership is still wavering, and Liu qiangdong is not personally satisfied with Wang’s work.
It is understood that 7FRESH’s previous cooperation with real estate developers was not exclusive. Hema, 7FRESH’s competitor, laid out a large area of open space defensively in order to prevent JD from opening standard stores, which to some extent led to the difficulty of opening 7FRESH stores.
At present, Hema is the way of “expanding and then grasping operation”. Since last year, Hema has invested intensively in a large number of supply chain companies and even set up subsidiaries with them. “Controlling the supply chain is the right way to go. 7FRESH is now a joint venture and nothing has been caught, “said one retail insider.
Blocked store openings have made them less attractive to brands. At 7FRESH’s restaurant attraction meeting in December, Wang explained in detail 7FRESH’s competitiveness and advantages, but according to a JD.com source who attended the meeting, “the 30 or so restaurant brands that participated in the meeting did not respond positively, and they all left right after the meeting.”
For brands that do not cooperate, 7FRESH even threatened to take off if they do not cooperate offline.
In terms of logistics, JD launched the “personal express” business last year to enter the C-end market. However, it remains to be seen whether it can generate substantial revenue growth for JD.
Currently, JD Finance is the best new business of JD, with an independent valuation of more than 133 billion yuan. The main income sources of JINGdong Finance are supply chain Finance division and Consumer Finance Division, but these two businesses are relatively dependent on JINGdong Mall. When the business of Jingdong Mall cannot achieve explosive growth, these two businesses are also difficult to achieve explosive growth.
In May last year, JD Finance completely split its business into two groups: personal service and enterprise service. According to people close to jd’s data department, jd Finance’s personal service group has also been readjured recently, merging insurance, ownership, equities, wealth management and other business segments.
For JINGdong, “surviving without arms” is a kind of courage; How to walk after the “broken arm” also requires wisdom.
In the view of senior analysts at Jienzhi Research Institute, the current organizational structure adjustment and optimization is jd’s active choice, which is conducive to the interests of long-term shareholders. “Logistics is an underlying asset at any time, and retail efficiency is a result of going concern, both of which are barriers. There is still an opportunity for JD.com to become a good company with consistent returns in the future.”
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